Participation in a company other than a Joint Stock Company

marzo 21st, 2012

Participation in a company other than a Joint Stock Company

The Minister of Finance authorized the participation (3) of a holding company in a company other than a joint stock company, under certain conditions:

– the authorized capital must be a minimum of fifty million francs;

– the holding company may not assume any administrative or management function within the held company;

– the sole objective of the company in which the holding company has a participation must be the taking of participations in joint stock companies to the exclusion of all industrial and commercial activity;

– the company in which the holding company has a participation will not be able to borrow money; this bar must be the direct result of the holding company’s contract which allows it to have access to all information in relation to its participation;

– the legal status of the company in which the holding company has a participation will be such that the responsibility of the holding company will be limited to its investment and that any claim on the part of a third party will be assumed by the management of the company.


Investment Funds

Investment funds have expanded in Luxembourg since 19 59 both in the form of investment companies and mutual funds, each of the latter being managed by a separate management company. Emanating from law practice, these juridical forms were originally subject to holding company law as enacted by the law of July 31, 1929.


The choice of Luxembourg as the domicile for investment funds found a new scope with the introduction of the August 25, 1983 Act which set up specific fiscal and legal regulations. Under this law, the structure of the investment company with variable share capital or SICAV (Société d’Investissement à Capital Variable) received its consecration. lnvestment funds were endowed with the following ad hoc tax structure:

– the 1 °/o contribution capital was replaced by a fixed rate of fifty thousand francs, payable at constitution and covering any subsequent capital increases;

– an annual subscription tax of 0.06°/o calculated on the base of the total net assets of the funds estimated on the last day of each fiscal quarter.


The March 30, 1988 Act, the most recent relating to investment funds. confirmed this fiscal structure.

Dividends paid by these funds are made without withholding tax and are not taxable in the case of non-residents. The holding company status still applies to advisory companies under certain conditions fixed by the ‘Administration de l’Enregistrement.


These conditions are that:

– the social aim of the company may only allow assistance of one investment fund;

– the advisory company must invest 5°/o of its authorized capital in the fund, within a minimum of 2 million francs;

– the advisory company may own other transferable securities, but 25°/o of the authorized capital must be invested in the Luxembourg Public Fund at a minimum of one rnillion francs;

– the capital of an advisory company must be more than three million francs.

Financial Holding company

febrero 14th, 2012

Group Notion


The term ‘group of companies’ includes:

– on the one hand, all companies covered by a single name which constitutes the ‘trade name’ associating them ( e.g. multinationals);

– on the other hand, those in which the companies within one and the same group have a basic holding ( at least 25°/o) and with which they maintain continuing economic relations.;


Other Conditions


– the financial holding company must have a minimum subscribed capital of fifty million Francs (Ruling of the Secretary of State for Finance of September 24, 1981);

– the financial holding company must invest at least 10°/o of its subscribed capital in shares issued by companies within the group (Ruling n° 4654 of Ministry of Finance of August 5, 1985);

– Financial holding companies may receive treasury deposits from group companies with the aim of making the same available as loans to other group companies;

– investment in shares issued by group companies must be made within three months of the financial holding company’s constitution;

– a financial holding company is authorized to have ordinary holding company activities alongside its principle objective, i.e. the financing of a determined group;

– a financial holding company may borrow by debenture issues up to ten times its capital, and may also borrow up to three times its subscribed capital by other means.


Holding Company as a parent company

It has been proved in practice, that financial holding companies do not always fulfill the criteria of their special status, either that they do not satisfy the 1965 regulations on the belonging to a group, or that the subsidiaries obtaining financing from the holding company do not satisfy given conditions.

Therefore, the February 16, 1982 ruling of the Secretary of State for Finance recognised as financial holding companies, holding companies acting as parents of a group of companies(l) and qualifying for the special tax concessions available to holding companies with a capital of at least one billion francs. They may provide financial assistance to :

– any company of which they have effective control, whether directly or indirectly;

– any company which is held at least 25°/o by a ‘controlled company’

with which it has steady economic relations;

– any subsidiary of a company held at at least 25°/o.

Accounts receivable


An financial holding company may also accept accounts receivable (l) within its own group, subject to the following;

– such transactions are limited to financial holding companies as defined in the 1965 regulations;

– the financial holding companies remuneration must be under the form of a discount, assessed on the basis of the duration of the receivable and of market rates, or any lower rate;

– receivables shall be accounted for under ‘current assets, short term creditors’;

– a copy of a master contract for the acceptance of accounts receivable must be registered with the ‘Administration de l’enregistrement’ by each financial holding company before the conclusion of any such transactions





Financial holding companies

enero 3rd, 2012

Financial holding companies


Definitions :

This form of company appeared in 1965 following the incorporation in Luxembourg by important multinational companies of high capital holding companies in tended to finance group subsidiaries but in which they did not necessarily have an equity participation. Since the traditional interpretation of the 1929 Act was compatible with this kind of holding company, the Minister of Treasury, by decision of September 27, 1965, authorized holding companies belonging to an industrial or commercial group to finance the subsidiaries and companies affiliated to the group, without having a direct equity participation provided that

the following obligations were fulfilled:

– The financial holding company must be incorporated in the form of a public or private limited company(l);

– The parent company or the member companies of the same industrialor financial group must be parties to the act of incorporation in the capacity of founders;

– The shares of the holding companies must remain registered at all times;

– No shares may be transferred to persons outside the group until each loan has been totally repaid;

– The holding company’s portfolio must include shares issued by a company within the same group.

Financial holding companies


Types of holding companies

diciembre 5th, 2011

 Types of holding companies


In the mind of the 1929 legislators, a ‘financial participation company’ may include all types of capital concentration with as sole restriction the banning of all commercial activity. As shareholding acquisitions may be made ‘under any form whatsoever’, various kinds of institutions which may not necessarily have the same econorrric characteristics are concemed.


New applications have been added to those traditional provided for in the 1929 Act further to a flexible interpretation of legislative provisions by Luxembourg national authorities.


It has therefore always been accepted that holding companies could carry out the following activities, whether · such activities are independant or concurrent:


– Control

This type of company (a controlling company), by acquiring holdings in other companies seeks to exercise control with a view to directing, coordinating and rationalizing their various activities, without thereby directly or indirectly taking part in the conduct of the business of the subsidiary.

– Launching of newly created companies

Launching companies, by underwriting the shares of a newly establishedcompany, facilitate its initial phase, and several years later sell the shares when the company is sufficiently well known among the public to interest private investors.

– Patent Management

Patent companies manage and exploit exclusively by granting licences to subsidiarles and third parties, a portfolio comprising intangible assets (patents).

A holding company may furthermore hold a trade mark but it may only grant a licence in retum for payment to group subsidiaries. Nevertheless, a holding company may not hold in its portfolio rights that have not been patented such as know-how, franchises, ideas, designs and models.

– Investment

Investment companies ( or placing companies) create and manage on their own behalf a portfolio of transferable securities for one or more private individuals in accordance with the principles of private management ( risks are distributed geographically and amongst various sectors). It is particularly suitable for the centralized management of family assets,

particularly in cases of succession and property held ‘pro-indivisum’.



Subsequently, the activities of holding companies were enlarged to include notably financing activities by decisions taken by the Ministry of Finance (Registration and Estates Departments)

Advantages of a Luxembourg holding company

noviembre 2nd, 2011

Advantages of a Luxembourg holding company

Luxembourg holding companies enjoy numerous advantages.


Fiscal advantages:

– They are subject only to:

   · a 1 °/o contribution right assessed on the basis of the total net amount of equity contributions at the time of the holding’s constitution or with regard toa capital increase (in such a case the eventual issue premium is included in the assessment);

   · an annual subscription tax of 0,20°/o of the actual value of the shares issued by the company, with a 2,000.- F. minimum. Since the application of the December 19, 1986 Act, the collection of the subscription tax has been removed from bond issues made by a holding.

– They are not subject to Luxembourg tax under general law:

   · in particular, they are exempt from income and wealth tax, in thi regard, no tax is payable on their profits or their capital gain recorded during their lifetime or u pon dissolution;

   · they are also exempt from any withholding tax on dividends or proceeds of liquidation.

Income paid by a Luxembourg holding company to a foreign resident  is not taxable in the Grand Duchy.


Other advantages


-exchange control regulations are favourable (a holding company may notably el ose term exchange contracts with the aim of risk coverage);

– no condition as to nationality or residence is imposed regarding founders, directors, auditors or managers;

– no official publication of a detail of the portfolio is necessary

Holding companies in Luxembourg, definitions

octubre 23rd, 2011

Holding companies in Luxembourg. Definitions.



The July 31, 1929 Act, an essentially fiscal law, is the principal body of rules governing holding companies.


By virtue of article 1 of this Act: ‘S hall be regarded as a holding company, any Luxembourg company which has as its exclusive object the taking of participations of any kind whatsoever in other Luxembourg or foreign companies and the management and development of the value of such participations in such a way that it has no industrial activity of its own and has no commercial establishment open to the public.’


It is apparent from the text that holding companies may include every form of capital concentration, subject only to the restriction that all industrial and commercial activity is forbidden.


Any company which, in addition to taking up participations in other companies, directly or indirectly carries on an industrial or commercial activity is excluded from the concessions laid down by the 1929 Act, even as regards the part of its business which coincides exclusively with that of a holding company. All business carried on by such companies is, under these conditions, subject to the general company taxation law.


Holding companies in Luxembourg. Definitions.


Holding companies

septiembre 14th, 2011

Holding companies


Situated in the heart of Europe, the Grand Duchy of Luxembourg is, by virtue of its geographical situation, a particularly favourable location for the constitution of a holding company. Furthermore, Luxembourg’s membership of the European Economic Community and the stability of its political economic and social environment are factors propitious to the growth of holding companies.

In addition to the general environment, the efforts of the Luxembourg legislators to attract foreign capital to their territory and to avoid as far as possible double taxation on income from companies’ assets, are also noteworthy.

All guarantees of discretion are given to investors and depositors, especially since the legal establishing of banking secrecy by the April 23, 1981 Act and notably article 16 therein(l). This law imposes professional secrecy on banking and saving institutions, savings banks established as rural banks, and nonbanking financial institutions.



In accordance with this law, board members, management and other

employees of credit institutions are ~ubject to banking secrecy. Furthermore,

since the application of the June 28, 1984 Act on the organisation of the

auditing profession and article 9 thereof, auditors are also submitted to

professional secrecy(l).


These elements account for the increasing number of _ banks established in

Luxembourg(2), as well as the continued expansion of Luxembourg holding

companies in the last few decades, as confirmed by statistics(3).


All these factors tend to confirm Luxembourg’s ‘European Financial Status’.


Holding companies